Navy, GSA Say Contract Led to Waste, Maybe Fraud

An effort to buy floating barriers to protect the nation's fleet from attacks several years ago led to millions of dollars in waste and may have involved criminal fraud by a government employee and contractor, officials of the Navy and the U.S. General Services Administration told a House subcommittee yesterday.

The hearing followed a Washington Post report detailing how the Naval Criminal Investigative Service, the GSA and contractors worked together to sidestep rules designed to protect taxpayer money.

Invoices and other documents show that officials at the NCIS, which was responsible for the barrier project, directed the GSA to hire a favored contractor and subcontractor. Those companies did little significant work on the barriers but took at least $3.6 million in fees, according to audit documents.

With cooperation from the Navy and the GSA, the contractors also kept dozens of invoices below a $3 million threshold to avoid competition on a total of $53 million worth of work reviewed by the GSA inspector general's office, audit documents show.

NCIS Director Thomas A. Betro told the Armed Services Committee's seapower and expeditionary forces subcommittee that some activity surrounding the project, which started in September 2001, appeared "extremely bad and extremely illegal." He estimated that the government paid $4 million or more in excessive fees.

Betro said his agency began a criminal investigation four years ago and continues to press to prosecute as many as three people involved in the project. He said an NCIS official resigned in 2003 after being questioned by investigators. A contractor was asked to leave the agency's offices about the same time. No one has been charged in connection with the allegations.

"There was no question the individuals involved in this took improper actions," Betro said.

Betro's remarks were echoed by James A. Williams, commissioner of the federal acquisition service at the GSA. "What was done was wrong," Williams said. "It was not legitimate."

Both men said their agencies responded to the problems by making changes. The NCIS handed the barrier project to another Navy operation and hired more contracting officials. Williams said the GSA terminated its role as contract manager after learning about the alleged irregularities and has since created better oversight panels for large contracts and improved training for procurement officials.

"This was a different time," Williams told lawmakers. "I believe we have fixed those problems."

Rep. Gene Taylor (D-Miss.), the subcommittee chairman, said he was skeptical.

"The taxpayers are out a heck of a lot of money," Taylor said. "I have reason to believe we have been defrauded, and it looks like an inside job."

Rep. Roscoe G. Bartlett (R-Md.), the subcommittee's ranking minority member, asked the NCIS for a complete report, saying "this could become a textbook study" of procurement failures that lawmakers could learn from. Bartlett expressed surprise that the investigation has not been closed out.

"It seems incredible to me that the investigation could take four months, let alone four years," he said.